Can India keep its net zero by 2070 promise?

What quantum of coal-based power generation capacity is under construction today? The government has pegged this at 80 gigawatts (GW). However, if one reads the report of the Central Electricity Authority (CEA), only about 29 GW is under construction, with a paltry 5% from the private sector. This begs the question of what definitions of “under construction” are used by the CEA and the government. Will a plant still be at the drawing stage and qualify as being under construction, or is this label conferred only after the plant has been approved by the board? Or is it only after orders have been placed for the main plant that it is said to be under construction? The CEA report only considers the last case. So, there is little clarity on the status of the remaining 50-odd GW of capacity.

When the CEA published its revised optimal generation mix report in April 2023, it projected a peak demand of 335 GW in 2029-30, and the required coal-based capacity was estimated at about 250 GW. The generation mix is, of course, a cost optimisation exercise, and the share of each source -- coal, hydro, nuclear, solar, wind and batteries -- depends on the cost of generation that has been assumed. All these numbers are merely indicative since the power sector is decentralised, and actual capacity addition is a function of many variables and not just cost. Coal-based capacity existing when the CEA finalised its optimal mix report (in 2023) totalled 210 GW. Therefore, the additional capacity that must be set up between 2023 and 2030 stands at ~40 GW. Plans to add 80 GW thus factor in twice the additional capacity envisaged just a year ago (in 2023)! Incidentally, for the period 2020-21 to 2023-24, India’s cumulative target for thermal capacity generation was about 41.9 GW, and we achieved about 16.2 GW (38% of the target). The point here is that we may be planning for 80 GW, but what will actually be achieved is uncertain. That demand is rising faster than supply can be gauged from the plant load factor of thermal plants — a measure of capacity utilisation — going up to 76% in April from 71% in January.

The capacity addition target has been set at 80 GW for two likely reasons. One, the projected demand by 2030 would probably exceed what the CEA envisaged while finalising its optimal generation mix report. A maximum demand of 250 GWs has already been clocked in the final days of May. This is expected to have reached 260 GW in subsequent weeks. Two, the coal-based generation target has been set so high, likely due to inadequate addition of renewables capacity. Though tenders finalised in the first few months of 2024 have exceeded the target, there is still a long way to go. We need to add about 40 GW of renewables every year from now till 2030 to meet the targeted capacity, whereas our average achievement is about 10 GW per year! It would be pertinent to add that certain government policies have actually retarded the growth of renewables. The imposition of basic customs duty, insistence on buying equipment from an identified list of manufacturers, lack of access to grid connectivity, a cumbersome land acquisition process are all major obstacles. The mixed signals from the government exacerbate matters. To illustrate, not very long ago, it was announced that no new coal-based stations would be built.

That said, in the past few months, the government has left no stone unturned to ensure that coal-based generation is maximised. The directions to domestic coal generators on importing and blending coal or the directions given to imported coal generators to keep running their plants at full capacity are some examples. Similar directions have now been given to gas-based generators as well. Earlier, there was talk of keeping coal-based generating stations alive even after the expiry of their power purchase agreements (PPAs), usually valid for 25 years. The idea was to pool all such generators and draw up some fresh PPA. This, however, has not taken shape, possibly because of the reluctance of the Central Electricity Regulatory Commission (CERC). The government, of course, can’t solely be blamed for going ahead with coal-based generation; unless we add capacity, we will not be able to meet the 2030 demand. As it is, capacity addition from sources such as hydro, gas, or nuclear is low for various reasons.

Against this backdrop, India may have to compromise its commitment to become net zero by 2070 though the government claims that the added emphasis on coal generation will not affect our resolve. The power sector accounts for about 40% of India’s total carbon footprint. The new coal plants will be generating for the next 25 years at least (which possibly could be 40 years) after commissioning. This will limit the setting up of new renewable generation capacity given the cumulative utilisation factor of renewable capacity vis-à-vis traditional capacity. Each megawatt (MW) of coal-based capacity kept running will crowd out 4 MW of solar capacity.

Clearly, we are in a bind as pursuing both the goals, i.e., maximising coal-based generation and net zero by 2070, run contrary to each other. Tackling decarbonisation in transport and industry is a complicated matter. One can keep saying we are on the net zero path, but the reality is something else!

Somit Dasgupta is senior visiting fellow, Icrier, and former member (economic and commercial), the Central Electricity Authority. The views expressed are personal